MONTREAL, Dec. 6 /CNW/ - Air Canada today proposed a full Open Skies Agreement between Canada and the U.S. creating an unrestricted, single aviation market with the United States as the preferred option to fostering a competitive airline environment in Canada.

The airline outlined its proposal in a letter today to Transport Minister Collenette and U.S. Transportation
Secretary Mineta.

Air Canada's proposal follows on Minister Collenette's statement earlier this week that the government would look at options such as "more foreign competition, modified sixth freedoms or cabotage" as an alternative to re- regulation to increase competition in the Canadian domestic market. The proposal takes those suggestions further in advocating a single aviation
market for Canada and the U.S.

"We need a market solution as a means to foster a competitive environment in the Canadian domestic market," said Robert Milton, President and Chief Executive Officer. "While we had previously indicated to the Minister of Transport that we might be open to a domestic re-regulation of all carriers operating in the country if that was government policy, that is clearly not the preferred option for ensuring a competitive, efficient industry.

Furthermore, we would not support re-regulation if it involved any expropriation or indirect transfer of our market share, routes or assets. We do not believe a truly competitive environment can be developed in Canada by resorting to outmoded regulatory remedies such as limiting the number of carriers allowed to serve a market or a particular route, imposing frequency,
capacity or pricing restrictions or nationalizing the flag carrier.

"For this reason, in a letter to the Minister and U.S. Transportation Secretary Mineta today, I have urged the two governments to build on the success story of the 1995 Canada-US Open Skies Agreement by progressively removing all restrictions in order to arrive at a fully integrated, common air transport market with the United States," said Mr. Milton.

Unlike the open skies agreements the United States has concluded with over 50 other countries, the Canada-U.S. Open Skies Agreement maintains restrictions in the following areas:

-Fifth freedom rights for passengers and all-cargo operations;
-The right for all-cargo carriers to serve points in the other country on
a co-terminal basis; and
-Full routing and pricing flexibility on all air service operations,
especially to third countries.

"The restrictions to the 1995 Open Skies Agreement were put in place due to Canadian concerns on the impact open skies with the U.S. could have on the
airline industry in this country," said Mr. Milton. "The landscape has changed dramatically since then. As the past six years have proven, the liberalization of air policy between the two countries has been overwhelmingly positive for consumers and carriers on both sides of the border. U.S. carriers have long
sought greater liberalization in many of these areas and as North America's 7th largest carrier, Air Canada joins them in seeking these changes.

Furthermore, a fully liberalized Open Skies Agreement including the exchange of "modified sixth freedom opportunities" leading to full continental cabotage
rights will fully respond to the concerns of all stakeholders concerned with Air Canada's dominance of the Canadian industry," he added.

A number of academics and industry analysts have advocated allowing Canadian and U.S. carriers the rights to carry local domestic traffic through their own hubs - often referred to as "home-country cabotage" or "modified sixth freedom" as a means to increase competition in the Canadian market. Air Canada strongly supports this initiative as a transitional step towards the establishment of a fully integrated and common air transport market with the U.S. Granting both Canadian and U.S. carriers the right to carry domestic traffic from each other's country over their respective hubs will bring immediate benefits to consumers and airlines on both sides of the border. As a
result, Canadian consumers would have access to travel between Canadian points on United Airlines and American Airlines via Chicago, Northwest Airlines over
Detroit and Minneapolis and Delta Air Lines over Cincinnati. American consumers would have access to travel between U.S. points on Air Canada via
Toronto, Montreal and Vancouver. At the same time, the flow of U.S. traffic over Canadian airport hubs would be attractive to both airlines and passengers
as a means to avoid the congestion at major U.S. hubs.

Consistent with the sentiments expressed by the Canadian and U.S. governments in concluding the recent Joint Statement of Cooperation on Border Security and Regional Migration Issues, a new "Canada-U.S. Open Skies Plus" agreement as outlined above would further strengthen the already close economic relationship between the two countries. It would also be consistent with existing air transportation regimes in the EU and in Australia-New Zealand.

"In the post-September 11 environment, air carriers worldwide are seeking opportunities to enhance revenues," said Mr. Milton. "Moreover, the industry
is expected to see significant consolidation, especially in the U.S.

Liberalization of the 1995 Agreement will provide U.S. and Canadian carriers access to more markets while at the same time increase efficiencies and provide for a more competitive environment through enhanced domestic service options for consumers. Re-regulation of the Canadian industry will therefore become moot.

"Air Canada has proven time and time again that it can compete successfully and effectively with the very best. Our success in the transborder market is a case in point. We believe that creating a single aviation market is a win-win solution. It will boost both business and tourism. It will provide the ultimate solution to fostering a competitive airline industry for the benefit of Canadian consumers and the industry," concluded Mr. Milton.

A copy of the letter forwarded to Transport Minister Collenette and U.S. Transportation Secretary Mineta and a backgrounder entitled 'A Canadian Air Policy for the 21st Century' are attached.

I think this would be good for the Canadian airline Industry adding US carriers to more Canadian Airports. I hope this goes though as Canada and the US have very good open skies argreements and this would top it off.
Any thoughts?
YWG777

It's an idea I like as long as there is a means set up for allowing connecting travelers to breeze past Customs. (And that might not be far-fetched if a North American perimeter can be brought into being.)

Transiting through the U.S. between two Canadian cities has been a common practice for years for truckers and motorists traveling between the western provinces and eastern/southern Ontario, in spite of Customs.

Once the Customs issues are worked out, it's a win-win for both Canadian and U.S. carriers as it would beef up the loads on trans-border flights.

I think Air Canada *does* know what it's getting into here. Remember that AC has a far more extensive schedule of transborder flights than any of the American carriers; it wouldn't be tough to play with the schedule a bit to allow connections. They'd also be able to offer a far larger number of U.S. to U.S. city pairs than American carriers could offer Canada-to-Canada city pairs. Also consider that very few American hubs (aside from DTW, ORD, CLE, CVG, and MSP) are well-suited for Canada-to-Canada connections. AC's main hub at YYZ is well-suited for Northeast-U.S.-to-rest-of-U.S connections.

One additional factor here: Immigration & Customs. A Canadian passenger traveling on a U.S. carrier between two Canadian cities would have to clear U.S. Immigration/Customs in Canada at departure and then clear Canadian Immigration/Customs at his or her destination. A U.S. passenger traveling on AC via YYZ merely stays in the transborder area and never has to clear Immigration/Customs.

I also suspect that Canadians would be far more likely to use Air Canada than its American competitors out of national pride.

Seems to me this is more like window dressing to allow AC to keep it's nearly unregulated monopolies on profitable routes like YUL-YYZ. Would anyone fly through EWR/ORD/DTW instead of the non-stop?

My two cents worth
I think that would be a huge mistake on AC's part. People are pissed at Air Canada. Seeing that they are the only ones pretty much operating in Canada now domestic. This would put Canadians on Us Carriers and put a huge dent in Air Canada. Not to mention some of the other carriers.
Well this is just my thoughts on the whole thing